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EDITORIAL: Another chapter, another blank cheque

The Muskrat Falls generation dam's spillway and powerhouse are shown in this in this October 2017 photo supplied by Nalcor Energy. Auditors testified Friday that Nalcor Energy didn’t adequately investigate energy alternatives before going ahead with the Muskrat Falls option.
The Muskrat Falls generation dam's spillway and powerhouse - Contributed

Want to know the date that this province officially signed away a key piece of its fiscal stability?

December 10, 2013.

After that, everything else was water under the bridge — or water over the falls. Muskrat Falls, that is.

That was the official date of financial close on the project, following the federal loan guarantee, which had been signed just over a year earlier.

After that date, the government of this province committed to pay for any cost overruns on the project, including an equity guarantee agreement to ensure the project was completed.

The project was, exactly then, unstoppable.

If nothing else, that’s a message that’s been loud and clear from witnesses at the Muskrat Falls inquiry.

We’d agreed to complete the project, and to over any cost overruns with equity. If we didn’t, the federal government could complete the project, but we’d still have to pay the cost overruns.

In retrospect, it was a blank cheque.

Few people seemed to be thinking about that when financial close was reached.

“This is truly an exciting day for Newfoundlanders and Labradorians as we write another chapter in the province’s energy story,” then-premier Kathy Dunderdale said at the time.

Obviously, where we are now was not the chapter she was expecting.

The decision to go ahead at financial close was made without full and accurate information about what the cost of the project was then, let alone what the price would become. Former cabinet ministers have testified that they were not aware the project was already hundreds of millions of dollars overbudget, a fact that, coming so early in the project, might finally have made at least some of those same ministers say, “Hey, hold on a minute …”

But those same ministers can’t say that information wasn’t out there shortly afterwards: it was. The Telegram reported less than two months later that the guarantee had us so firmly on the hook that potential investors didn’t even have to consider whether the project was worth financing. One senior official with the bank spearheading borrowings for the project told The Financial Post, “The benefit of the guarantee was that no one had to look at the merits of the underlying project …”

Now, the provincial government is waiting, cap-in-hand, to see if the federal government will deign to help us out with changes to the agreement we made. More changes, that is, because the provincial government has already gone back to the federal government for a second loan guarantee to finance the project.

The province is looking for federal help that would come up with roughly $200 million a year to keep this province’s electrical rates from rising dramatically.

But we’ve come to this point in lock-step, brought here by the unstoppable results of that Dec. 10, 2013 stroke of the pen.

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